The UK tax year runs from 6 April to 5 April. At the end of each tax year, employers must complete a series of payroll tasks to finalise the old year and prepare for the new one. Missing the deadlines results in penalties from HMRC.
Payroll Year-End Timeline
| Deadline | Task |
|---|---|
| 19 April | Submit final Full Payment Submission (FPS) for the tax year |
| 19 April | Submit final Employer Payment Summary (EPS) with year-end declarations |
| 31 May | Issue P60s to all employees |
| 6 July | Submit P11D and P11D(b) to HMRC |
| 22 July | Pay Class 1A NIC on benefits in kind |
| Ongoing | Apply new tax codes and NIC thresholds from 6 April |
Step 1: Process the Final Payroll
Run the last payroll of the tax year for all employees who are paid on or before 5 April. This is the final pay run that will be included in the old tax year.
Check that:
- All overtime, bonuses and commission due in the tax year have been included
- Any back pay has been processed
- Statutory payments (SSP, SMP, SAP, SPP) are correctly recorded
- Student loan deductions have been applied at the correct rate
- Tax codes are up to date for the final pay run
Step 2: Submit the Final FPS
The Full Payment Submission (FPS) reports each employee’s pay, tax and NIC deductions to HMRC in real time through the RTI system. The final FPS for the tax year must be submitted on or before the last payday of the year.
If your last payday is before 5 April, mark the FPS as the final submission for the year. Most payroll software has a tick box or flag for this.
If you do not pay any employees in the final period, submit an EPS instead to tell HMRC that no payment was made.
Step 3: Submit the Final EPS
The Employer Payment Summary (EPS) is submitted alongside or after the final FPS. The year-end EPS includes declarations that confirm:
- Whether you have claimed the Employment Allowance
- The total amount of statutory payments recovered (SMP, SAP, SPP, ShPP)
- Whether you are a small employer for recovery purposes
- That this is the final EPS for the tax year
The final EPS must be submitted by 19 April. If it is late, HMRC may issue an incorrect payment demand because it will not have the recovery and allowance information.
What the EPS Contains
| Field | Purpose |
|---|---|
| Statutory pay recovered | Total SMP, SAP, SPP and ShPP offset against PAYE liability |
| NIC compensation | 3% compensation for small employers |
| Employment Allowance | Confirms claim for the year |
| No payment indicator | Used in months where no employees were paid |
| Final submission indicator | Confirms this is the last submission for the tax year |
Step 4: Issue P60s
Every employee who is on the payroll on 5 April must receive a P60 by 31 May. The P60 is a summary of total pay, tax and NIC for the tax year.
The P60 must show:
- Employee’s name and National Insurance number
- Total pay subject to PAYE
- Total tax deducted
- Total NIC (employee and employer)
- Student loan deductions
- Statutory payments received
- The employer’s PAYE reference
P60s can be issued electronically or on paper. If an employee leaves before 5 April, they receive a P45 instead, not a P60.
Step 5: File P11D and P11D(b)
If the company has provided employees with benefits in kind or expenses that are not covered by the exemption, these must be reported on form P11D by 6 July.
Common benefits reported on P11D include:
| Benefit | P11D Section |
|---|---|
| Company car | Section F |
| Private medical insurance | Section I |
| Interest-free or low-interest loans | Section H |
| Accommodation | Section D |
| Non-exempt expenses | Section N |
| Other benefits | Section M |
Form P11D(b) is the employer’s declaration summarising the total Class 1A NIC due on all benefits in kind. The Class 1A NIC payment is due by 22 July (or 19 July if paying by cheque).
Payrolling Benefits
Since April 2016, employers can opt to payroll benefits in kind instead of reporting them on P11D. If a benefit is payrolled, its cash value is added to the employee’s taxable pay each month and tax is deducted through PAYE. Payrolled benefits do not need to be reported on P11D, but the employer must still file P11D(b) to report Class 1A NIC.
Step 6: Prepare for the New Tax Year
Once the old year is closed, the payroll must be updated for the new tax year starting 6 April:
Tax Code Changes
HMRC issues tax code notices (form P9) in January and February for codes that change from 6 April. Apply all new codes from the first pay date on or after 6 April.
Common changes include:
- Updates to the personal allowance
- Adjustments for underpaid or overpaid tax from the previous year
- Changes resulting from benefits in kind being coded
NIC Threshold Changes
Update the payroll with the new National Insurance thresholds:
| Threshold | Used For |
|---|---|
| Primary Threshold | The point at which employee NIC starts |
| Secondary Threshold | The point at which employer NIC starts |
| Upper Earnings Limit | The cap for the main rate of employee NIC |
| Lower Earnings Limit | Minimum earnings for NIC qualifying purposes |
Statutory Payment Rate Changes
Update the rates for:
- Statutory Maternity Pay, Statutory Adoption Pay, Statutory Paternity Pay, Shared Parental Pay
- Statutory Sick Pay
- Student loan and postgraduate loan thresholds and rates
National Minimum and Living Wage
Check that all employees are paid at or above the new National Minimum Wage and National Living Wage rates from 1 April (note: this is 1 April, not 6 April).
Step 7: Reconcile and Archive
Before moving to the new year:
- Reconcile the payroll liability account to HMRC statements
- Check that all payments to HMRC and pension providers are accounted for
- Archive payroll records for the completed year – HMRC requires records to be kept for at least 3 years after the end of the tax year (6 years for Corporation Tax purposes)
- File all RTI submissions, P60 copies and expense records securely
Common Payroll Year-End Mistakes
- Late EPS submission – without the final EPS, HMRC assumes no recovery and sends a higher payment demand
- Wrong tax codes applied – failing to apply new codes from 6 April leads to under or over-deduction
- P60 not issued by 31 May – this is a statutory obligation and failure is a penalty offence
- Forgetting to update statutory rates – paying old rates of SMP or SSP from 6 April onwards
- Not reconciling to HMRC – differences between what the payroll shows and what HMRC expects cause problems throughout the year
Penalties for Late Filing
| Submission | Penalty |
|---|---|
| FPS late (1-3 months) | £100 per 50 employees per month |
| P60 not issued | Up to £300 per employee |
| P11D late | £300 per form, plus £60 per day if still outstanding |
| P11D(b) late | HMRC estimates Class 1A NIC and charges penalties |
| Class 1A NIC paid late | Interest from the due date |